The South African Revenue Service (SARS) is tightening its scrutiny of South Africans living abroad
Image: Timothy Bernard / Independent Newspapers
The South African Revenue Service (SARS) is tightening its scrutiny of South Africans living abroad who claim to be non-residents for tax purposes.
According to Delano Abdoll, Legal Manager: Cross-Border Taxation at Tax Consulting South Africa, the revenue service is increasingly moving beyond standard documentation checks and is now focusing on a more detailed assessment of taxpayers’ actual living circumstances when evaluating non-residency.
"Where does your spouse live? Where are your personal belongings? Have you applied for permanent residence or citizenship abroad," he said.
"These are just some of the 17 probing questions the South African Revenue Service (“SARS”) is now asking South Africans living and working abroad who wish to obtain confirmation of their non-resident tax status – often viewed as the final step in their tax emigration journey".
He added that SARS has historically relied more heavily on formal proof such as tax residency certificates, but is now placing greater emphasis on where a person’s life is actually based.
He pointed out that in one recent case, SARS issued a detailed information request to a taxpayer, going beyond departure records and instead examining factors such as family ties, financial interests, employment arrangements and where personal belongings are kept.
"The significance of these questions is not necessarily the individual answers. What is noteworthy is that SARS appears to be conducting a comprehensive treaty residency analysis rather than simply reviewing whether a taxpayer has physically left South Africa. The questions mirror many of the factors contained in international treaty tie-breaker provisions."
The questions posed by SARS extended far beyond the taxpayer’s departure date.
• The taxpayer’s intention when leaving South Africa;
• Their most fixed and settled place of residence;
• Their habitual abode and day-to-day lifestyle;
• The location of their business and personal interests;
• The location of their spouse and family’s interests;
• Employment arrangements and contract terms;
• Banking relationships and financial interests;
• Immigration and residency status in the foreign country;
• The location of personal belongings;
• Social, cultural and community connections; and
• Whether permanent residence or citizenship had been sought abroad.
He said that SARS appears to be shifting towards a more rigorous, fact-based approach in determining tax residency, particularly in cases involving double tax agreements.
He added that this shows the application of treaty “tie-breaker” principles in practice, where factors such as family location, financial interests, habitual residence and personal ties are used to determine which country has the stronger claim to tax residency.
"A common misconception among expatriates is that tax residency automatically ends when they leave South Africa. While physical departure remains an important fact, it is only one part of the overall analysis.
"A taxpayer may have relocated abroad but still maintain significant personal, economic or family connections to South Africa".
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